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Greece and China Adds to Risk Aversion

Fan Yang from CMS Forex at 02/15/10


Greece and China Adds to Risk Aversion

Greece’s debt concerns continue to hurt the Euro. General risk aversion was amplified by further policy’s by China in its recent attempt to ease its economic boom and stem inflation. The risk aversion boosted the USD, and JPY, but hurt commodity currencies such as CAD and AUD.

EUR/USD: Expansion Swing

Daily: The EUR/USD is continuing its decline without any major correction so far. This second leg looks to extend beyond 100% projection.The 127-138.2% expansion, coincident with 78.6% retracement (61.8% of a larger swing) is 1.3350 area. This is a viable conservative projection of the short-intermediate term.

GBP/USD: Continuation Scenario

Daily: The GBP/USD pair traded in a narrow range less than 200 pips wide this week. This consolidation comes in the context of a sharp decline.Swing projection in the daily, brings the market to 1.54 area. However, if the market continues to decline, the next support, and more aggressive projection is the 127-138.2% expansion (1.50 area). This is coincident to 61.8% retracement.4H: The ranging price action this week creats a channel. A breakout on the upside brings the market to 1.59, but this is still in context of a retracement in this time-frame.A break below has a pattern breakout projection slightly below 1.54. A swing projection brings the pair to 1.53. This is the first target, which the 1.50 area is the more aggressive one.This is roughly the 100% expansion/50% retracement area looking at the daily.

USD/JPY: Is Retracement Done?

Daily: We have been stalking the USD/JPY’s choppy 3-wave retracement. The market came to the 78.6% retracement area last week. It was supported above the 88.50 level.The choppiness of the market makes it hard to say whether this week’s rally is simply a short-term correction of its intermediate-term retracement that started January.The stochastic confirms at least a short-term bullish action towards the 91.0 area. However, the weakness of the rally brings anticipation of further decline, so keep both scenarios equally open.

USD/CAD: Completed Retracement Cycle

EUR/GBP Completed Bearish Butterfly

GBP/JPY: Adjusting Outlook

Daily: The market has paused around the 139.00 support. The momentum in the daily shows further bearish strength.4H: Looking at the 4H time-frame, we see a possible flag pattern. The stochastic has a bearish divergence. The swing projection brings the pair to near 135.0 area. The market might continue until the 143.20 area before returning to the decline. Then, the projection would be more like 136.00.Looking back at the daily, you see that the 136.00 area is also the 61.8% retracement, and would possibly provide support, at least for the short-term.The pair might be in a bearish mode, which can push it further to the 128.50 area, which is 78.6% retracement. This is also confluent with the pattern breakout projection in the daily time-frame.

AUD/USD – Remains in Consolidation

Fan Yang
Currency Analyst
Commodity Trading Advisor

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